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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






2. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






3. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






4. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






5. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






6. 0 < Ei < 1






7. Ei = (%dQd good X)/(%d Income)






8. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






9. Occurs when LRAC is constant over a variety of plant sizes






10. The change in quantity demanded resulting from a change in the price of one good relative to other goods






11. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






12. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






13. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






14. Ed = (%dQd)/(%dP). Ignore negative sign






15. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






16. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






17. The practice of selling essentially the same good to different groups of consumers at different prices






18. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






19. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






20. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






21. Entry (or exit) of firms does not shift the cost curves of firms in the industry






22. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






23. MUx / Px = MUy/Py or MUx/MUy = Px/Py






24. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






25. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






26. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






27. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






28. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






30. Entry of new firms shifts the cost curves for all firms upward






31. The marginal utility from consumption of more and more of that item falls over time






32. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






33. A firm that has market power in the factor market (a wage-setter)






34. Demand for a resource like labor is derived from the demand for the goods produced by the resource






35. All firms maximize profit by producing where MR = MC






36. Ed < 1






37. AVC = TVC/Q






38. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






39. Es = (%dQs) / (%dPrice)






40. Ed > 1 - meaning consumers are price sensitive






41. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






42. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






43. The additional cost incurred from the consumption of the next unit of a good or a service






44. Models where firms agree to mutually improve their situation






45. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






46. Ed = 8 - infinite change in demand to price change






47. The output where ATC is minimized and economic profit is zero






48. ATC = TC/Q = AFC + AVC






49. Two goods are consumer substitutes if they provide essentially the same utility to consumers






50. Costs that change with the level of output. If output is zero - so are TVCs.